HMO or PPO: Which Is Better?

Is an HMO or a PPO right for you?

Doctor showing health information to patient
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It’s not easy to pick a health insurance plan. There are so many different options and factors to consider. You have to look at the cost of the plan, plus how much you’ll have to pay out of pocket for medical appointments and medication.

But it’s not all about the money. You also need to investigate which doctors you can use with each plan and see how much flexibility you’ll have getting care out of network if you need to.

When you’re comparing plans, two common options are a health maintenance organization (HMO) and a preferred provider organization (PPO). There are pros and cons to each one, so here’s more information to help you decide which one is best for you.

Key Takeaways

  • HMOs and PPOs are both popular health care plan options. An HMO is a health maintenance organization, while a PPO is a preferred provider organization.
  • HMO plans require referrals from your primary care doctor to see specialists; PPO plans do not.
  • An HMO often costs less than a PPO. However, you’re limited to providers who are in-network. You’re responsible for all out-of-network costs, except those resulting from medical emergencies.
  • A PPO provides greater flexibility in terms of which providers you can see. However, you’ll pay more compared to HMO plans.

What Is an HMO?

An HMO is a type of health insurance plan designed to lower your medical costs. With an HMO, you select a primary care doctor from a network of providers. This doctor helps coordinate your health care needs, referring you to specialists if needed.

What Is a PPO?

A PPO is a type of health insurance plan you can use to seek care from different doctors without a referral. However, if you seek care out of your network, you may need to pay more. 

What’s the Difference Between an HMO and a PPO?

An HMO and a PPO are both types of health care plans. However, there are several differences between the two.

Feature HMO PPO
Primary care choice Must select a primary care doctor Don’t need to select a primary care doctor
Specialists Need a referral from your primary care provider Can visit a specialist without a referral 
Premiums Lower premiums  Higher premiums 
Deductibles  Depends on plan; typically low or no deductible Depends on plan; often has separate deductible for out-of-network providers
Coinsurance Depends on plan; typically low coinsurance Depends on plan; typically higher coinsurance 
Out-of-pocket costs Lower out-of-pocket costs Higher out-of-pocket costs 
Out-of-network costs Not covered, except in emergencies Covered, potentially with higher costs 
Filing claims Likely don’t need to file any claims  May need to file claims for out-of-network providers 

Primary Care Choice

With an HMO, you must select a primary care provider. This doctor facilitates your care. If you have a health care need, you go to your primary care doctor first. If you need to see a specialist, that doctor sends a referral.

With a PPO, you don’t have to select a primary care doctor. You can go to the doctor you want without a referral. This means more flexibility and freedom to visit different doctors.

Specialists

If you need to see a specialist and you have an HMO, you’ll need a referral from your primary care doctor. If you have a PPO, you can call and make an appointment with a specialist without a referral. 

Premiums

Both HMOs and PPOs require a premium. This is the amount of money you pay each month for your insurance. HMOs typically have a lower premium compared to a PPO.

Deductibles 

Your health insurance deductible is the amount of money you have to pay before your health insurance coverage starts. Both HMOs and PPOs usually have deductibles, although with HMO plans, it’s often less. With a PPO, you may have a separate deductible for out-of-network providers.

Coinsurance

Coinsurance is the percentage of health care costs you are responsible for paying out of pocket. This kicks in after you’ve met your deductible. Both HMOs and PPOs can have coinsurance. Typically, HMOs have lower coinsurance amounts compared to a PPO. 

With a PPO, you may have a low coinsurance for providers who are in the network. However, if you choose to go to an out-of-network provider, you may have to pay more. Make sure you review the details of your policy so you know what to expect.

Out-of-Pocket Costs

If you stay within the network, your out-of-pocket costs with an HMO are predictable and often less than other insurance types.

Your out-of-pocket costs with a PPO may vary. If you go to out-of-network providers, you’ll typically have to pay more. In addition, out-of-network care providers might be able to balance bill you. This means you’d have to pay the difference between the amount the doctor charged and the amount your insurance company paid. 

Money you pay to out-of-network providers may not count toward your plan’s out-of-pocket maximum. This means you could need to pay much more than you were expecting if you seek out-of-network care.

Out-of-Network Costs 

With an HMO, out-of-network care isn’t covered unless it’s a true medical emergency. If you choose to go to a provider outside your network, you’re responsible for the bill.

If you have a PPO, out-of-network benefits are included. You’re allowed to seek care from any provider. However, you might need to pay more for out-of-network providers. 

Filing Claims

When you have an HMO, you’ll most likely never have to file a medical claim. Instead, your provider bills your insurance, and your insurance pays the provider directly. With a PPO, you usually won’t need to file claims. However, if you visit out-of-network providers, you may need to file a claim.

Which Is Right for You?

HMOs and PPOs are both popular types of health insurance plans. To help you decide which one is better for you, ask yourself these questions: 

  • Do I need to keep my monthly costs low? If yes, an HMO might be better.
  • Do I already have a doctor I prefer to keep seeing? If yes, you’ll want to check and see if this doctor is in your network. If they aren’t, a PPO might be the better choice.
  • Am I a traveler? If you frequently travel and leave your network’s area, a PPO would provide greater flexibility.
  • Do I want a primary care doctor to help manage my health care needs? If yes, an HMO is the better choice.
  • Do I mind having to wait to get a referral before I see specialists? If you don’t want to wait, you might prefer the freedom of a PPO.

An HMO and a PPO are both solid options, but only you can decide which one is right for you.

Frequently Asked Questions (FAQs)

How do I know if I have a PPO or an HMO?

Review your health insurance policy to see if it explains which type of plan you have. If you have a primary care provider you’re required to go to before seeking other care, you likely have an HMO. Otherwise, it could be a PPO or a different type of insurance plan.

What is a dental HMO?

A dental HMO (DHMO) requires you to pick a primary dental facility to oversee your oral health. This type of plan often costs less than other types of dental insurance. DHMOs tend to focus on preventive care through a variety of means, including encouraging you to make regular trips to the dentist.

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